February 21, 2005
Volume 8, Issue 1

Claria to Launch BehaviorLink Service

Making good on its statement filed in April with the Securities and Exchange Commission (SEC), DCIA Member Claria Corporation announced last week that it intends to start a behavioral targeting service.

With the new service, Claria will send targeted ads to consumers based on their surfing activity. The service, called BehaviorLink, will build detailed – but anonymous – profiles about consumers by combining information from cookies that track behavior across a limited number of commercial websites with information about the surfing habits of 40 million existing subscribers gleaned from the company's ad-serving software.

Beginning in the second quarter, Claria will purchase ad inventory from portals and publishers, and then serve ads from marketers who have signed up for the service. The ads will appear as part of the publisher's website.

Claria also intends to continue sending adware pop-ups to consumers who download the company's ad-serving software in exchange for free software like Kazaa, said Chief Marketing Officer Scott Eagle.

"BehaviorLink is a great way for them to leverage the systems they've got and the technology they've put together," said Jupiter Research analyst Gary Stein.

So far, about 100 advertisers – including those who already use Claria for adware – are on board. Claria also has about 3,000 sites currently available; until now, the company has run ads promoting itself on those sites.

Eagle said Claria intends to spend at least $100 million purchasing ad inventory this year, up from $25 million. To gear up for the launch, Claria hired 15 new employees in the fourth quarter, and intends to hire 25 others.

The company also aims to persuade a publisher to add Claria to its toolbar, in hopes of growing its software-subscriber base to at least 100 million.

The company has formed a privacy team in connection with the behavioral marketing service. Members include Richard Purcell, President of Corporate Privacy Group and former Chief Privacy Officer of Microsoft; Larry Ponemon, Chairman of the consultancy Ponemon Institute; and former Federal Trade Commission attorney Lewis Rose, now at the law firm Collier Shannon Scott.

Purcell said the company is "following accepted industry practices" in its new initiative – that is, Claria doesn't collect or store personally identifiable information about Web users.

Trymedia Tops 200 Million Game Downloads

DCIA Member Trymedia Systems, a provider of secure digital distribution services and operator of the world's largest distribution network for downloadable games, announced last week that over 200 million legitimate games have been downloaded using its ActiveMARK technology.

Trymedia's game distribution network has grown to include 1,000 premier titles from more than 100 top publishers. Over 300 leading portals, retailers and peer-to-peer (P2P) software providers make Trymedia's game catalog available to millions of users in over 30 countries and in seven languages and currencies.

"Trymedia has pioneered the game distribution network concept as well as a number of significant advances in digital distribution, including P2P sales, super-distribution, and single-step DRM for disc and download," said Alex Torrubia, Co-Founder, President & CEO of Trymedia. "Our partners will continue to receive the highest level of protection, revenues, and end-user satisfaction for the foreseeable future."

Trymedia's ActiveMARK technology enables publishers and portals to maximize the value of their PC games. Each time an ActiveMARK-enabled game is copied, it automatically reverts to trial mode, allowing the subsequent user to play the game for a limited amount of time before being given the option to purchase. ActiveMARK also allows consumers to securely share, back up and play games on multiple computers whether the content is delivered by CD or via download.

Trymedia began operations in 1999 and was the first to sell legitimate content via P2P and the first provider to deliver a game online simultaneously with retail.

According to International Data Corp., the total revenue of downloaded games is projected to reach $1 billion by 2008.

Report from CEO Marty Lafferty

This event, which took place in the McGraw-Hill Main Auditorium, was designed to showcase new companies that offer ways to earn substantial revenue from file sharing. Our primary objective was to take the mystery out of marketing content securely and profitably through P2P.

The DCIA networking event immediately following at Crash Mansion with live entertainment by Jen Elliott and Bluestruck was wonderful, thanks to City Canyons Records' Trebor Lloyd who graciously sponsored our after-party. Jen Elliott is extraordinarily talented, and for those who missed this event, we highly recommend attending one of her next live musical performances at your convenience.

Sharing is Caring: P2P Without Paying Up

It's nothing new that artists have been fighting for their rights to get paid for their work—and when it comes to P2P file sharing, tap shoes and microphones have been flying left, right and center for years now. But somewhere on the sidelines, the Benvolios of P2P have now made an attempt to speak up on behalf of compromise, seeing therein a potential gain for both the downloaders and the digital content owners.

One of the companies at the forefront of this movement is OffthePeer, "the fastest growing website for downloading authorized peer-to-peer music and video files." The company – which just announced that they've exceeded 5 million downloads – distributes content via two models: pay-per-download, as well as on a free, advertiser-sponsored basis that still ensures that artists and owners get paid for their content and retain their copyrights.

The idea is clearly one that could pull in tons of advertising dollars – if the public were more aware of its existence and accepting of what these companies have to offer.

As it now stands, these models are just finding their footing in the P2P scene. OffthePeer is part of DCIA Member INTENT MediaWorks, a digital media distribution company that is pretty much a baby in its genre. "We just announced this company one year ago this week," said Les Ottolenghi, president of the company.

But they're gaining ground. In their one year of existence the company has "gone from about three content rights holders to about 15,000"—and they're growing all the time.

By integrating marketing tools like discounts to a movie or promotional trailers into their offers, OffthePeer allows users to download licensed content for free from P2P. "What we've been finding is that ad sponsors like this because it's a very low cost way to get their message out," Ottolenghi said. "It's demographic matching." Cheap marketing is always a plus, and knowing that it'll get through to the right recipient is even better.

Doesn't this put them in competition with the likes of Kazaa? Ottolenghi told me, "We are now in agreement and partnership with file-sharing software providers like BearShare, eDonkey, Grokster, Kazaa, LimeWire, and Morpheus, and that means we address approximately 60 million people per month who come online to look for digital downloads. Our business is to work with the rights holders (artists, producers, film companies, etc.) and get their content distributed directly."

Allowing the artists to hold on to what is rightfully theirs is a big deal, and if musicians are concerned strictly with losing out on money and distribution control, then this service at the very least offers them more options.

"For the enthusiastic artist this company is my #1 choice," Kevin Bledsoe, President of CapTones, a jazz band that uses the service, told me. "What they have offered me is an opportunity to be empowered via the net and P2P exposure for original compositions and arrangements that can be shared with my fan base via a link within an e-mail."

Furthermore, INTENT doesn't bank until the artist does. They take a cut off the top of each sale, but their percentages are "very small," according to Ottolenghi. "We're banking on high volume and low overhead." And because they work with the file-sharing software distributors and their files are legal, they claim to have secured prime placement on the major search engines. OffthePeer swears by the safety of their files and emphasizes that they have no spyware.

Another way INTENT keeps things safe and consumer friendly is by using fellow DCIA Member Digital Containers as their digital rights management (DRM) technology. Basically, Digital Containers provides secure containers where digital content owners can place files along with any secondary materials; once the container is put together, it can be distributed through P2P, forwarded by email or sold on websites on a permission basis.

So if services like OffthePeer give artists the chance to make money, and marketers—rather than P2P users—the chance to spend it, why hasn't the idea caught on even further? Heidi Gabrielson, VP Marketing for Digital Containers explained to me that, "It's not the technology that's preventing adoption. It's politics that are holding back the industry." But whatever the forecast on the political front, a few new mergers are bound to make someone sit up and notice.

For example, Digital Containers has just recently announced their partnership with fellow DCIA Member Clickshare, a payment services company for digital content providers, to streamline the legal P2P business on both the provider and consumer sides. With Clickshare, the artist will no longer have to deal with keeping up with multiple merchant accounts. Instead, Clickshare cuts one virtual check culling together the money earned from various sources and "the money just arrives in the artist's account," according to Clickshare's CEO Rick Lerner. And consumers will avoid having to sign up with multiple vendors to buy the content they want.

"Clickshare has a different approach and that's that we work with the businesses that have built their clientele," Lerner explained. "Rather than providing a separate place for people to sign up new, we simply enable existing registered users at these other sites to access and purchase content from other places…the Clickshare network." Lerner's mantra is, "If you make it difficult, they're not going to pay; if you make it easy, we believe they will pay."

Clickshare looks at this merger as a prequel to the future of P2P. "This year I think the music companies are realizing that peer-to-peer has the potential to be a strong marketing component in the same way that the Internet has been over physical sales," Lerner explained, "so they're coming around to realize that they can use this medium to very efficiently market new artists, see what's going on with the artists, understand what the community and consumer base is looking for, and capitalize on that."

With the concept of sponsor paid music, you may get a few more ads to look at, but if it's a legal cure to an illegal and out of control problem, who cares? As long as the music keeps flowing, and we don't have to fork over huge sums just to jam out, why not put up with a few promos? Advertisers have already taken over TV, radio, and the Internet in general. Why should digital music be any different?

Logitech Selects SVC Financial

DCIA Member SVC Financial Services, an emerging provider of secure electronic payment and digital rights management (DRM) solutions for online retailers and financial services companies, announced last week that Logitech, one of the world's leading manufacturers of computer peripherals, is using the company's SVC Mazarin Factory product for its worldwide brand management.

"Logitech has distribution in more than 100 countries," said SVC President & CEO Christopher Haigh. "For a retail power with complex requirements like Logitech to choose SVC for its worldwide brand management demonstrates not only how powerful the Mazarin platform is but also how easy it is to use in a globally distributed environment. We are particularly gratified that Logitech is reporting a significant improvement in its brand management thanks to our product."

Designed for use by any user or group with PowerPoint skill levels, SVC's Mazarin Platform provides rapid application delivery from pre-developed templates for music, politics, non-profit, marketing, and product showcases using simple drag-n-drop for rich media and content.

Digital Music Jukebox Powered by Predixis

Entempo LLC last week announced a new 20 GB music player, Rubato, with digital rights management (DRM) and ShoX technology, based on the SigmaTel 3550 series chipset, which includes several codecs such as Microsoft's DRM, MP3, and regular WMA.

As the market for legitimate downloads explodes, DRM based portable devices allow users full mobility of their music libraries. The 20 GB drive can hold over 5,000 songs as well as other data files. Other features of the Rubato include an FM Tuner, ear bud recording, USB 2.0 for fast data transfer, and DCIA Member Predixis' MusicMagic playlist management software – the ultimate digital music power tool.

MusicMagic automatically analyzes the user's music collection. Based on acoustical analysis, a "sounds-like" playlist can be created automatically and quickly, just by picking one song. With MusicMagic now on the Rubato, playlists can be created on the go. MusicMagic provides powerful navigation for any type of music – from popular and classical to independent and international.

"Rubato caters to the exploding download market," said Randolph Kemps, VP Marketing & Sales for Entempo. "As more users download music – by definition protected music – the need to export to, and to manage these tracks on a portable device become an essential feature. MusicMagic is the ideal tool to navigate these large libraries of music and to create instant playlists."

Rubato will be available at major retailers and Internet resellers beginning February 21st. The suggested retail price is $239.

RazorPop & P2P PATROL Protect Children

DCIA Member RazorPop last week debuted TrustyFiles 2.4 High Performance File Sharing, the peer-to-peer (P2P) file-sharing industry's first child-pornography file-reporting solution. The software release follows a P2P PATROL (Peer-to-Peer Parents And Teens React On Line) meeting in Dallas for private sector and law enforcement representatives at which RazorPop previewed its new offering. P2P PATROL, the industry's voluntary initiative to combat child pornography in the P2P environment, last week also upgraded its P2Ppatrol.com website.

TrustyFiles makes it simple for file-sharing users to report child pornography. Users click the offending file in their search results, downloads, or shared files, select the Report Child Exploitation command, and confirm their report. The report is automatically sent to the P2P PATROL's child-pornography lead processing resource (http://cphotline.org); all reports are anonymous. TrustyFiles software also features a warning message when a user enters a search term known to be associated with child pornography. Resources and instructions for using the new TrustyFiles child-pornography reporting feature can be found at http://trustyfiles.com/help-child-protection.php.

"With the addition of the child pornography file report, RazorPop continues to lead the fight to protect our children," said Marc Freedman, RazorPop Founder & CEO, developer of TrustyFiles. "We do not tolerate child pornography users or their illegal material, and we work closely with federal, state, and local law enforcement organizations to combat this scourge."

Coming Events of Interest

Digital Music Forum - The 5th annual DMF is set for March 2nd at the French Institute Alliance Francaise in New York. DMF is the premier event for music industry decision-makers focused on business models and legal issues impacting music.

Shawn Fanning, Co-Founder of SnoCap will be the keynote this year, and featured panelists include Phil Corwin, Chief Lobbyist for DCIA Member Sharman Networks (owner of Kazaa); Jeff Bronikowski, VP of eLabs, Universal Music Group; Martin Elgison, Partner of DCIA Member Alston & Bird; and Ted Cohen, SVP of EMI Music.

Canadian Music Week - Headquartered at the Fairmont Royal York in Toronto, March 2nd-5th, CMW will be the largest music and entertainment convention in Canada.

The DCIA Is proud to participate in "Redemption Song: Profit from P2P" moderated by LA Times correspondent Joseph Menn March 3rd at 2:45 PM. P2P has been the killer app driving the billion-dollar broadband business, and can generate new revenues for music rights-holders. There are a slew of new companies offering moneymaking P2P plans. This panel will consider whether it's time to talk carrot instead of stick.

Future of Digital Music Forum – "What's after iTunes?" is the theme for The 2nd Annual DallasBlue Future of Digital Music Forum being held on Thursday March 24th, from 5:30 PM to 9:00 PM at Swan Court in Richardson, TX.

Five years ago the question was "What's after Napster?" Today iTunes is the poster child for Hollywood in a far more complicated environment. Overall music sales are flat. Broadband, the digital home, and wireless are increasingly pervasive. P2P continues to thrive despite an adverse environment. Online music services are popping up like weeds.

An expert panel spans the technology and entertainment sectors. Presentations and moderated discussions examine the convergence of music, consumer marketing, and technology. Sponsored by DCIA Member RazorPop.

Supreme Court Oral Arguments – The US Supreme Court will hear arguments March 29th on whether companies that provide peer-to-peer (P2P) software violate copyright laws if their users commit copyright infringement. The Court's date for oral arguments in the case, MGM v. Grokster, coincides with an expected decision in a similar high-profile case in Australia, which involves Kazaa.